Conflicting Opinions Regarding the Validity of the FCC’s Pre-2015 ATDS Rulings

As our regular readers know, one of the central issues in the ACA International case was whether the FCC’s vague and expansive definition of an ATDS would withstand judicial scrutiny. The D.C. Circuit found that it did not. As we explained at the time, ACA International explicitly set aside the portion of the FCC’s July 2015 Order that pertained to the definition of an ATDS, and by doing so also implicitly set aside the FCC’s prior statements on this subject in prior orders.

Following ACA International, plaintiffs have tried to limit the decision by arguing that it set aside only the 2015 Order, i.e., that it did not abrogate any related prior orders. Several courts have rejected this argument, as discussed here and here. Although the case law is still developing, three recent decisions demonstrate that courts are increasingly of the view that ACA International invalidated the FCC’s entire treatment of the ATDS definition, whether in its 2015 Order or in its related prior orders.

In Thompson-Harbach v. USAA Federal Savings Bank, the parties filed cross-motions for summary judgment and asked the court to address whether a predictive dialer that calls numbers from a stored list of numbers—rather than having generated them randomly or sequentially—was an ATDS. No. 15-2098, 2019 WL 148711, at *10 (N.D. Iowa Jan. 9, 2019). The Northern District of Iowa held that the ACA International decision “necessarily invalidated the FCC’s 2003 Order and 2008 Declaratory Ruling insofar as [they] also define a predictive dialer as an ATDS, even when the predictive dialer lacks the capacity to generate phone numbers randomly or sequentially and to then dial them.” Id. at *10. It reasoned that “ACA International’s concern that the FCC in the 2015 Declaratory Ruling ‘fail[ed] to satisfy the requirement of reasoned decision making’ due to the agency’s ‘lack of clarity about which functions qualify a device as an autodialer’ . . . applies with equal force to the 2003 Order” and the 2008 Declaratory Ruling as well, which simply “‘affirm[ed]’ the understanding of ATDS articulated in the 2003 Order.” Id. at *11 (internal citations omitted).  The court went on to hold “that a device meets the definition of an ATDS only when it is capable of randomly or sequentially producing, or randomly or sequentially storing telephone numbers.” Id. at *12. In doing so, it rejected the Ninth Circuit’s contrary construction in Marks v. Crunch San Diego, LLC, 904 F.3d 1041 (9th Cir. 2018). It concluded by entering summary judgment in favor of the defendant, as the dialing equipment at issue lacked the “critical” feature of “the capacity to randomly or sequentially produce or store a number and then call that number.” Id. at *14.

The other two recent decisions are from within the Third Circuit. The first is Richardson v. Verde Energy USA, Inc., in which the Eastern District of Pennsylvania reached the same conclusion as Thompson-Harbach and held that ACA International’s “invalidation of the 2015 Order necessarily invalidated the 2003 and 2008 Orders.” No. 15-6325, 2018 WL 6622996, at *5 (E.D. Pa. Dec. 17, 2018). It noted that Dominguez v. Yahoo, Inc. is the only relevant post-ACA International decision from the Third Circuit to address the “statutory definition of an ATDS.” Id. at *5 (citing Dominguez, 894 F.3d 116, 119 (3d Cir. 2018)). But it noted that the Dominguez decision—which we covered here—was “somewhat cryptic” because it “neither discussed nor cited the 2003 and 2008 Orders, leaving open whether those orders remain binding within the [Third Circuit].” Id.

The Richardson court reasoned that “the D.C. Circuit found the 2015 Order arbitrary and capricious because it gave ‘no clear answer,’ . . . as to the critical question of ‘whether a device must itself have the ability to generate random or sequential telephone numbers to be dialed,’ or whether it would be ‘enough if the device can call from a database of telephone numbers generated elsewhere.”’ Id. (quoting ACA International, 885 F.3d at 701, 703). “In ACA International, the D.C. Circuit explained that, in their determination that all predictive dialers qualified as ATDSs, the 2003 and 2008 Orders were similarly inconsistent as to this basic question.” Id. (citing ACA International, 885 F.3d at 702-03). Thus, the Richardson court determined that “[t]he 2015 Order therefore necessarily invalidated the 2003 and 2008 Orders” because ‘“they express the same understanding’ as the 2015 Order that ‘all predictive dialers qualify as ATDSs.’” Id. (internal citations omitted). Next, the Richardson court held that Dominguez “stands for the proposition that, to qualify as an ATDS, calling equipment must have the capacity to generate numbers using a random or sequential number generator and then call those numbers.” Id. at *7. Because the plaintiffs failed to establish that the device at issue satisfied this standard, the Richardson court granted defendant’s motion for partial summary judgment on the ATDS issue. Id. at *8-9.

Conversely, in Wilson v. Quest Diagnostics, Inc., the District of New Jersey held that ACA International invalidated only the FCC’s 2015 Order. No. 18-11960, 2018 WL 6600096 (D.N.J. Dec. 17, 2018). The Wilson court initially observed that the FCC’s 2003 Order included predictive dialers within the statutory definition of an ATDS and the FCC “reaffirmed” this position in its subsequent orders. Id. at *2. It reasoned that the FCC’s 2015 Order “expanded the concept of capacity, finding that the capacity of an [ATDS] is not limited to its current configuration but also includes its potential functionalities with modifications such as software changes.” Id. (emphasis added). In its view, the ACA International decision “only struck down the expanded interpretation in the 2015 Order as unreasonable,” and held that Dominguez “made no proclamation declaring the prior FCC Orders invalid.” Id. at *3 (emphasis in original). As a result, it held that a predictive dialer qualifies as an ATDS so long as it has “the [present] capacity to dial numbers without human intervention.” Id. It then denied the defendant’s motion to dismiss, reasoning that the plaintiffs had sufficiently pleaded that the defendant had contacted her using a predictive dialer that met this standard. Id. at *4-5.

The Thompson-Harbach and Richardson decisions were right to find that the ACA International decision invalidated prior orders to the extent that they—like the 2015 Order—held that a predictive dialer is an ATDS. The Wilson decision glossed over the key aspects of the ACA International decision, stating that the 2015 Order lacked “reasoned decision making” due to the lack of clarity about which functions qualify a device as an ATDS. Instead, the Wilson court focused too narrowly on the fact that the FCC’s 2015 Order expanded the concept of “capacity.”

Michael P. Daly

About the Author: Michael P. Daly

Mike Daly has spent two decades defending, counseling and championing clients that interact with consumers. His practice focuses on defending class actions, handling critical motions and appeals, and maximizing the defensibility of marketing and enforceability of contracts. Clients large and small have trusted him to protect their businesses, budgets and brands in complex cases across the country.

Matthew M. Morrissey

About the Author: Matthew M. Morrissey

Matthew Morrissey focuses his practice on high-stakes litigation. He frequently defends clients facing class actions arising under federal and state consumer protection and privacy laws. Matt also represents clients in complex commercial disputes, securities litigation and other financial services matters pending in courts across the country. Matt develops business-focused resolution strategies for clients in all phases of the litigation process. He has achieved significant victories in contentious disputes at both the trial court level and on appeal. He has also obtained highly favorable results in private arbitration and mediation proceedings.

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